Ottawa is investigating an allegation that several dozen Canadians working in Alberta’s oil patch were laid off recently and replaced with foreign workers.

“They called the guys into an office, told them that they were gone, and they literally walked past the replacements on the way out,” said Gil McGowan, president of the Alberta Federation of Labour. Keep reading.

According to a study by Scotiabank of more than 50 plays across Canada and the U.S., Western Canadian plays — including those in the oil sands — cost less to produce on average than plays in the U.S. such as the Bakken in North Dakota, and the Eagle Ford and the Permian Basin, both in Texas.

“Investors may have the perception that Canadian oil plays are less cost-competitive than the new ‘light, tight’ oil plays in the United States, which is not the case,” said Patricia Mohr, vice-president of economics and commodity markets specialist at Scotiabank.

According to the Scotiabank study, released Thursday, the Saskatchewan Bakken offers one of North America’s best deals with a break-even cost of US$44.30 a barrel — including a 9% after-tax return.

Oil from in-situ oil sands projects in Alberta is produced at a break-even cost of US$63.50 on average, and oil from existing integrated oil sands mining projects has a break-even cost of US$60 to US$65, also including a 9% after-tax return, making them very resilient even if oil prices weaken significantly.

Some of the non-oil sands heavy oil plays, such Alberta heavy oil, yield some of the best profit investment ratios across North America, Ms. Mohr said.

“We have a competitive oil sector on the cost side, and technology development has been key,” Ms. Mohr said.

In contrast, oil produced from the U.S. Permian basin has a break-even cost of US$81 a barrel, U.S. Bakken oil comes in at US$69 and the U.S. Eagle Ford at US$63.57, according to Scotiabank.

A report by Bank of Montreal oil and gas analyst Randy Ollenberger comes to similar conclusions: Full-cycle supply costs for the lowest-cost oil sands producers are below those of tight oil.

Based on reported financial results, tight-oil producers on average require a crude oil price of about US$77 per barrel to cover all costs and generate a 10% rate of return.

In comparison, the break-even price for the average in situ oil sands project is about US$65 a barrel, says the BMO report, released Feb. 3.

The findings challenge perceptions that tight oil in the U.S. is more economic than Canada’s oil sands and that it could displace some oil sands growth. The perception has pushed up the share prices of a number of U.S. companies, Mr. Ollenberger writes.

All play types have advantages and disadvantages. The oil sands have the important upside of being able to produce and expand for decades once projects are built.

Today, they are struggling to grow because of lack of transportation capacity, resulting in depressed share prices.

“The real issue for us continues to be market access and the need for export diversification in order to garner and guarantee world oil prices for our oil,” Ms. Mohr said.

Bottlenecks have resulted in discounts on Canadian oils, but they have been narrowing with the addition of rail, pipelines and refining capacity.

Tight oil plays in the U.S. are closer to consumers, but their rapid growth has resulted in a supply glut that refiners are struggling to keep up with.

As in the oil sands, technology will continue to improve and potentially drive down costs, Mr. Ollenberger said.

What’s uncertain is whether tight oil will be around long enough to benefit.

Tight oil plays produce a lot at the front end, but decline quickly. The typical tight oil well produces a third of initial month production six months out and roughly 20% of initial production by the third year.

There is plenty of skepticism that tight oil won’t keep growing at the rate it has in the past few years. Already, Ms. Mohr notes, production in the Permian is plateauing.
Bottom line: tight oil has been credited with putting North American energy security within reach, but the oil sands can be counted on to get us there at a competitive cost.